The future of gas

A full transition to a decarbonised energy system is not possible without a clear understanding of the future of gas. Revolutionising an established energy system is a massive undertaking, involving significant costs, resource gaps and infrastructure overhauls.

For this reason, the UK Government founded NESO to bring a unified, whole-system view to energy, treating gas and electricity as interconnected domains. This joined-up approach is critical, as the energy industry needs substantial time to prepare for such profound changes. This will involve adapting business models, investing in new technologies and retraining teams across the entire value chain.

While electricity often dominates decarbonisation conversations, gas provides essential flexibility, reliability, and seasonal storage capacity. The UK’s extensive gas infrastructure is a valuable asset that can be adapted to transport low-carbon gases like hydrogen and biomethane. Leveraging these networks is important for building a diversified, resilient energy system that can meet demand while progressing toward net zero.

The journey to net zero is a complex, long-term undertaking. As such, some critical decisions need to be made. For instance, as demand for natural gas declines, some parts of the network may be repurposed for new fuels like hydrogen or CCS, while others may be decommissioned. This requires a systematic and planned approach to manage the extensive national network.

Elsewhere, key government publications like DESNZ’s Midstream Gas System update and Ofgem's latest RIIO-3 price control proposals provide strategic direction on the future of natural gas and the funding required for a successful transition. These documents signal an ongoing need for clarity on policies like biomethane subsidies and hydrogen levies to support a cohesive market.

As highlighted in NESO's FES 2025 report, the gas network's essential role must evolve to support a range of different low-carbon gas futures. Xoserve is actively preparing for this transition. For instance, our Project Trident initiative is modernising the UK Link platform to ensure it remains agile and ready for the profound changes ahead.

Europe is still dependent on natural gas, particularly imported gas. As of 2021, gas made up 23% of the region’s total energy supply, with 85% of it brought in from elsewhere. As such, moving away from these supplies isn’t just essential for environmental purposes, but for energy security too.

Russia’s invasion of Ukraine has exposed and hastened this transition. Approved in 2020, the European Green Deal had already set out that unabated fossil fuel contracts couldn’t run past 2049. However, the impact of the Russia-Ukraine war on EU energy security led to the development of the RePowerEU plan in 2022.

Alongside the Revised Directive EU/2023/2413 and the EU Hydrogen Strategy, this plan accelerates the switch to clean gas alternatives and reduces EU reliance on Russian energy by:

• Taking a common gas procurement approach for the whole region, ensuring a consistent supply of affordable energy via AggregateEU and the EU Energy Platform
• Stopping all imports of Russian gas by December 2027
• Producing 10 million tonnes and importing 10 million tonnes of renewable hydrogen by 2030, with the aim of it covering 10% of EU energy by 2050
• Delivering a Biomethane Action Plan via the Biomethane Industrial Alliance and produce 35 billion cubic metres (bcm) of the gas by 2030

Establishing the correct infrastructure and a competitive renewables market are the main barriers to an effective energy transition. To overcome these, further directives and strategies have been developed to ensure the affordability and viability of green hydrogen and biomethane production and use.

Directive (EU) 2024/1788 and Regulation (EU) 2024/1789 were adopted in May 2024 to establish common rules for the internal renewables market. They also contain measures which protect consumers’ rights in line with those currently used for the electricity market. This will ensure EU customers get the best energy deals and experiences.

These directives also set out the policies for creating a shared, coordinated infrastructure for alternative gases, including hydrogen. To ensure this focused cross-border approach, the European Commission also approved the creation of the European Network of Network Operators for Hydrogen (ENNOH). Plus, the European Hydrogen Backbone (EHB) is a coordinated plan to repurpose region-wide gas pipelines for hydrogen.

These measures have given individual countries greater confidence in the alternative gas market. This has led to:

• Germany becoming a leader in hydrogen gas development, with €18.6 billion of its Climate and Transformation Fund being dedicated to this up to 2027
• The Netherlands setting a green gas production target of 2 bcm by 2030
• Denmark aiming to fully decarbonise its gas grid by 2035, with 40% of its supply being sourced from domestic biomethane as of 2023
• France developed 731 biomethane production sites which were injecting the gas into the network, with a total capacity of around 13.8 TWh per year. The country aims to quadruple biogas production to 50 TWh by 2030

The UK and EU are navigating the future of green gas through differing policy frameworks. As highlighted in Ofgem’s preliminary Strategic Direction Statement, a key concern is the potential for regulatory divergence between the UK and EU.

Given the interconnected nature of our gas networks, addressing these differences and aligning on key policies will be crucial to fostering a cohesive and efficient renewable gas market in Europe - one that benefits both consumers and the environment.